Subprime Suspects

What a biased article. Mr Moore, do you actually have a MBA? I don???t think most people blame the current financial crisis on actual poor minority homeowners. I think greedy banks and their CEOs, investors/speculators and people who live beyond their means are to blame for this mess. But politicians are just as much to blame (OR MORE TO BLAME) for turning a blind eye to what was going on with the mortgage industry, especially while the government was financially backing companies like Fannie Mae and Freddie Mac with taxpayer???s money. Chris Dodd and Barney Frank are just a couple of congressmen who should be held partially responsible for allowing this to happen. Did you know that Barney Frank???s partner/boyfriend, Herb Moses worked at Fannie Mae from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie Mae? ( http://www.foxnews.com/story/0,2933,432501,00.html ). Also we should also not ignore the fact that other politicians were basically ???paid off??? with large contributions in order to ignore what was going on while the CEOs of these lending institutions and Fannie/Freddie just got richer.
Lastly, lending institutions should never have been forced to lower their lending standards (ie. engage in subprime lending) and loan to anyone with little or poor credit history, with no verification or income, etc. If these banks did NOT give these loans, then their CRA (community reinvestment act) rating was lowered, which in turn impeded their ability to expand and grow. If these lending standards had not been relaxed, we would not have seen this kind of abuse. Anyway, that???s my take. Here???s another article which further explains this mess. http://www.eppc.org/publications/pubID.3566/pub_detail.asp

If you are correct, that this problem was caused by bad loans to rich white guys, then there ought to be a whole lot of formerly-rich white guys running around. But, there aren't.

Frankly, you are misunderstanding the argument that CRA caused this. CRA created a culture and Fannie and Freddie. The CRA required Fannie and Freddie to alter standards and buy loans that they wouldn't have otherwise bought. The lenders then tood advantage of the loosey-goosey standards and made loans to people who shouldn't have gotten them. In other words, it isn't the minority loans, per se. It's the fact that standards were lowered in order to make those loans. Lower standards led to the implosion.

You can't very well argue that this would have happened if the standards were higher. Certainly, lower standards played a part in it. The only question is what force made it possible to make and sell risky loans. The answer is the CRA.

Mr. Gross, how did you get your job? Can anyone as clueless as you write for Newsweek? Reading you is like watching someone take a crap in the middle of the street - one is just speechless.

"What you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul." - From Billy Madison

Mr. Gross, how did you get your job? Can anyone as clueless as you write for Newsweek? Reading you is like watching someone take a crap in the middle of the street - just speechless. LOL.

'What you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul." - Billy Madison

Yep, this is what the fast and loose rich and their gullable suburban counterparts do when they get caught screwing around with the money they should've never touched: they blame in on poor people. And since we're talking about community investment, I'm sure the assumption is that a lot of brown people are to blame for breaking the economy because they "got loans they couldn't repay."

Fact: a white couple making 30K normally gets the same amount of mortgage as a black couple making 90K. Fact: the majority of people on "welfare" are caucation--66%! So, with these facts in mind, there were probably more whites in the defaulting category than browns simply because they were the ones more likely to get the mortgages.

But let's think for a minute here. How many 100K mortages does it take to bankrupt a bank that needs 85B to bail it out? Do we really think that many mortages were made to poor people? Come one people! What about also speculating investors who drove the price of those houses through the roof, borrowed against them and then left them to foreclosure when things got rough? How many of them qualified for 500K to 5M in loans and never lived in any of these residences?

I'm sure there are plenty of people at the bottom have problems that probably shouldn't have gotten some of those loans. But to make them the full weight of this problem is just business as usual--blame the poor folks when cheating and stealing boils over and causes monumental problems that can no longer be swept under the rug. That's not going to solve our problems. And it certain won't keep them from happening again in the future.

Once again, when rich country-clubites' fun-loving, money-grabbing "projects" turn into fiascos, the cheapest, easiest and most palatable excuses turn on the poor, who are traditionally shut out of such rot. Come on people, check the stats. Traditionally, it takes a black couple earning 90K to get the mortgage a white couple earning 30K gets. These are long-running facts. So I'm not sure who these "welfare" folk are unless they're the white folks who make up 66% of the welfare rolls. Even more so, let's say it's the poor white couple who got that loan the middle-classed black couple did not. Stands to reason, on his 30K salary, at most he got, let's be generous, was, say 200K, probably more like 150K. How many of those does it take to match the 800 Million we just gave wall street to bail it out? Isn't it much more the rich investors who could routinely get 500k to 1.5M who defaulted on the properties they help to speculate incredibly upward? Not to say that there weren't some losses at the bottom. However, how naive and incredibly stupid it would be to suggest that high-end cheating was not going on here--I mean outright immoral theft. You see, not admitting that means it will continue. Look at Lehman Brother's junket after being bailed out. Do you think that idea just accidently for the first time jumped into their heads? Or are they used to carrying on and getting away with this type of stuff all the time, they and others like them.

You're talking about the very people who make the economy run. How convenient for people to turn on the organizations there to help them get a fair shake they hadn't been getting, during this time of crisis instead of truly pulling the blame where it should be, and somehow, digging ourselves out of this mess, never to return again. Elitism at its worst.

This is one of the most absurd articles that I have ever read!!! Mr. Gross writes that the CRA was to "expand homeownership to people who had been shut out for economic reasons." "Economic reasons!!" Oh, maybe like THEY CAN'T AFFORD TO PAY BACK THE MOTGAGE!!!! Mr. Gross even has the gall to admit that the definition of subprime lending is lending to "people who were borrowing over their heads." And what is he inferring to when he says that subprime lending is a "symptom, not a cause?" A symptom of what? That capitalism without government intervention does not lend money to people who can't possibly pay it back? Wow! I must be a radical to think that you shouldn't loan money to people who can't pay it back. Is Mr Gross inferring that homeownership and borrowing money you can't afford is a right! You socialist pig! Borrowing money is an obligation, and one that shouldn't be taken lightly. Mr. Gross was correct on one point, Wall Street firms and banks that had no obligation under the CRA to make subprime loans were a bunch of dumb sons of $!^@#&$ that we should have never bailed out with public funds. However, Mr. Gross you need to do your homework. The largest holders of the subprime loans is Fannie and Freddie by many multiples. Without the implied guarantee that Fannie and Freddie were backed by the full faith and credit of the federal government it unlikely that those Wall Street dumb @$$%$$ would have followed them over the cliff. And, without congress Freddie, Fannie and the CRA would not exist.

Why isn't anyone talking about what would have happened if Bush's plan to privatize Social Security, which McCain voted for, had passed. McCain's ridiculous plan regarding health insurance, which would basically result in hundreds of thousands of more people being uninsured, combined with his support of screwing up Social Security, are the most important issues in this election.

I have been listening to Rush and Savage and several of the right wing fanatics for the last few days and they are trying to start race wars by claiming that this whole mess occurred becuase we MADE banks give loans to minorities. This country will continue to go to Hell in a handbasket as long as freedom of press means hatemongering and blatant racist lies. I am amazed at people wholisten to this every day as if these radio buffoons are actually objective people who care about the country.

The number one cause of the mortgage problem was shipping jobs overseas and hiring 2 million H1-B's during the last 10 years. Minorities are NOT to blame

The blame rests with the fat cat Democrats who received huge sums of money and did nothing to warn or regulate Fannie Mae and Freddie Mac...names....Chris Dodd , Barney Franks , Barack Hussein Obama should all face jail time.
Barack Hussein Obama is the key guy behind ACORN , now involved with voter fraud registration and its the same organization who intimidated and bankers to make bad loans to poor people who couldn't afford the mortgage in the first place...your man..Barack Hussein Obama is behind all this.

Barack Hussein Obama "KNOWS" Bill Ayers is an unrepented terrorist yet he starts his political career with a party in Bill Ayers living room , he chairs the same left-wing board in Chicago with Bill Ayers funnelling millions of dollars into the radical teaching program. This is anti- American !!
Terrorists knocked down the Twin Towers on September 11 and now this Muslim who still says he's a Christian is about to go into the White House ! ..are Americans nuts ?
Remember ..you are who you keep....that makes Obama a traitor , terrorist , radical , elitist and a liar. !!!!!
His circle of close friends and advisors are ; BILL AYERS , REV WRIGHT, LOUIS FARRAKHAN, REV PFLEGGER, FANNIE MAE & FREDDIE MAC CEO's, ACORN.....THIS AUTOMATICALLY DISQUALIFIES BARACK HUSSEIN OBAMA TO BE COMMANDER - IN - CHIEF. FURTHERMORE HE OWES THE US TROOPS AN APOLOGY...." THE US MILITARY IS AIR RAIDING & KILLING INNOCENT CIVILIANS IN AFGHANISTAN "...BARACK IS A TRAITOR AND A LOW LIFE. OH YA, HE GOT HIS MANSION IN CHICAGO FOR FREE FROM TONY REZKO ...AT LEAST MCCAIN PAID FOR HIS HOUSES...AND TONY REZKO IS A CRIMINAL !!

When I refinanced my house a few years back, I specifically told the lending company that I wanted a 30 year fixed rate mortgage. When the showed up at my house they had an ARM, not what I asked for at all. What's more I did not realize this until I was half way through the signing, and noticed the rate increased after a few years - the person I was working with never said anything, and when I brought it up he strongly pushed for a signing, trying to tell me how much better it would be to have the lower intial rate. He seemed astounding that I would actually want a rate that didn't vary over time.
Well, we were half way through the paperwork, so we completed it - then my wife and I discussed it afterward. The next day we went in and cancelled the agreement (we have a three day period in Minnesota in which this can be done).
This story provides at least anecdotal evidence of how hard lending companies can push a client to buy something they dont actually want and might not be able to handle. In this case, I feel that I was nearly the victim of fraud, and it would have been extrodinarily easy to have been trapped by the malfesance of the lender. Not all cases are like this, of course, but when confronted by a system where this occurs blaming the victim is not the best answer.
Michael
PS The loan company continues to call us, years later, even though we have asked to be put on thier Do Not Call list

Actually Crystal, part of what Mr Gross said was ???On the Republican side of Congress, in the right-wing financial media (which is to say the financial media), and in certain parts of the op-ed-o-sphere, there's a consensus emerging that the whole mess should be laid at the feet of Fannie Mae and Freddie Mac, the failed mortgage giants, and the Community Reinvestment Act, a law passed during the Carter administration. The CRA, which was amended in the 1990s and this decade, requires banks???which had a long, distinguished history of not making loans to minorities???to make more efforts to do so.???
And he is right. We do place blame here. It is part of the problem. Probably the beginning of the problem, which in turn greedy CEOs intensified. Unfortunately, no matter what good the CRA may have intended, it did FORCE banks to loan to low-income people with little or no credit history, and with no verification of income, or if there were verification, they were forced to include welfare payments and unemployment checks as viable income. You have your MBA. You tell me???.is that good business practice? If banks did NOT give the loans, then their CRA rating was lowered, which in turn impeded their ability to expand and grow. Since these loans were guaranteed by Fannie and Freddie (guaranteed by the government)???and they held the greatest percentage of high risk paper, that is why they are at the forefront of this issue.
Unfortunately, and it is a fact, a great percentage of these people getting these types of loans were minority. Do I blame them for taking advantage of a system? Yes. It???s called personal responsibility. But I blame the well off too for purchasing homes they couldn???t afford or second homes they are defaulting on, developers for building huge McMansion communities and then not being able to sell them, and also speculators who just wanted to flip houses over and over again and now they are stuck because they didn???t pay attention to the market. They just walk away, and now we are left holding the bag. Bad regulations and de-regulations were at fault. Both Democrat and Republican. Minoritys are not all to blame???but they also share part of the pie of guilt.

The article is not blaming the rich as Edward Thomas below claims- the main goal of this article is to clarify that minority and poor people aren't to blame. I feel like minorities are used more often as an example than any other group. Turn on Good Morning America, or the World News at night and chances are the person they'll interview about being foreclosed on with be either African-American or Hispanic person. As a young African American woman who has been house hunting I have encountered numerous stereotypes and generalizations that people have made about me before actually getting to know me. I have my MBA, great credit and a high paying job with the largest commercial bank in the country yet realtors and lenders automatically assume that I'm just barely keeping my head above water and can't afford a home. And the news media only panders to these stereotypes. I'm glad that Mr. Gross took the time to focus on the fact that it is not minorities and lower-income people that are to blame.

Shame on Mr. Gross for cleverly using the article to blame the rich. This assesment is shallow at best as it fails to capture the real essence of what happened. Now is not the time for liberal or conservative ranting and raving so with all due respect Mr. Gross we need you to rise up beyond the rantings. You are focusing only on one segment of the problem and are contributing to divisions among us as a people rather than helping with any solution. I understand you feel an urgency to defend your liberal views but now is the time to put the country ahead of your rantings. If the Fed didn't lower the Fed Funds rate to 2% back in 2001 we would not have seen so many bad entries into the housing market. Many of the new homeowners during that time had their rates readjust some five years later when the Fed had moved the rate up to 5.25%. During the housing boom prices escalated beyond reasonableness and compounded the problem.
Whether anyone likes it or not the reality is that the CRA opened the door for this problem especially since the Fed didn't recognize the new repercusions of changing the Fed rate would be so severe. During the 1990's Fannie and Freddie had over 40% of their portfolios in low to moderate income homes and this was fine then. It became a problem when the economy changed and the recession of 2001 hit. During this time the move to reduce the Fed Funds rate to 2% was considered the best option available. The Fed slowly raised the rates to 5.25% (due to inflation concerns over potentially rising fuel and food costs) and then held it there there for more than a year. This led to a lot of people no longer keep up with their adjusting mortgages at the much higher tates. This led many of them to put there homes on the market only to find a large many others doing the same and driving down prices. The media caught wind of this and started shouting "recession" and so people panicked and pulled money out of investments and then others did and the mess reached down to where it is now. Many others that got the no doc LIAR loans simply walked away from their homes. This left the value of their notes hard to price (ergo worthless). The severity is far too big to now blame the companies left holding this paper. Let us hope for positives from the CDS auction tomorrow for Lehmans.

With all due respect is childish and petty to blame the rich people on Wall Street. There is too much to blame to go around to blame the rich people you despise. We are all to blame so lets all learn form this, get out of this mess and never allow it again.

Now is the time to pull together and bring our best to the equation.